Nigeria Dollar Scarcity to Persist Till 2018 – Moody’s

Nigeria Dollar Scarcity to Persist Till 2018 – Moody’s

Despite the Central Bank of Nigeria’s efforts to strengthen the value of the naira against the dollar, Moody’s Investors Service has said foreign currency shortages will remain in the country till 2018.

“But this has been to the detriment of the non-oil economy, price stability and government balance sheets. Moody’s expects these challenges to continue in 2017 but alleviate in 2018,” the agency said.

It noted further that in Gabon and the Republic of the Congo, which are members of the Central African Monetary and Economic Union and where access to foreign currency borrowing is limited, the common local currency was pegged to the euro, adding that foreign exchange reserves have collapsed.

In view of that Moody’s said it expected reserves to continue falling through 2017 but at a much slower rate.

“Dollar shortages make it difficult to pay suppliers of imported goods and equipment, meet dollar debt payments or to repatriate funds outside of the respective countries.

“The associated local currency weakness increases the cost of servicing unhedged foreign currency debt obligations, reduces repatriated profits in foreign currency and lowers operating margins, as companies are not able to pass on high import costs to the consumer”, adds Mr Bate. Non-financial corporates with dollar revenues such as commodity operators and corporates with dollar-linked contracts are insulated from these risks,” Moody’s Vice President and co-author of the report, Dion Bate, said.